10. INCOME TAXES

Ambac files a consolidated Federal income tax return with its subsidiaries. Ambac and its subsidiaries also file separate or combined income tax returns in various states, local and foreign jurisdictions. The following are the major jurisdictions in which Ambac and its subsidiaries operate and the earliest tax years subject to examination:



Jurisdiction	Tax Year
United States	2010
New York State	2011
New York City	2011
United Kingdom	2009
Italy	2009

As of September 30, 2015 Ambac had loss carryforwards totaling $4,831,481. This includes carryforwards of $143,491 relating to U.S. capital losses, $91,863 of Ambac UK loss carryforwards, and an ordinary U.S. federal net operating tax carryforward of approximately $4,596,127, which, if not utilized, will begin expiring in 2029, and will fully expire in 2034.

The tax effects of temporary differences that give rise to significant portions of the deferred tax liabilities and deferred tax assets at September 30, 2015 and December 31, 2014 are presented below:



	September 30, 2015			December 31, 2014
Deferred tax liabilities:
Insurance intangible	$	447,807		$	493,822
Variable interest entities	15,615			14,149
Investments	147,881			138,072
Unearned premiums and credit fees	99,372			104,589
Other	33,768			33,835
Total deferred tax liabilities	744,443			784,467
Deferred tax assets:
Net operating loss and capital carryforward	1,691,018			1,890,551
Loss reserves	119,427			185,881
Compensation	6,016			5,276
AMT Credits	18,439			10,359
Other	9,540			9,539
Sub total deferred tax assets	1,844,440			2,101,606
Valuation allowance	1,101,954			1,319,218
Total deferred tax assets	742,486			782,388
Net deferred tax asset (liability)	$	(1,957	)	$	(2,079	)

In accordance with the Income Tax Topic of the ASC, a valuation allowance is recognized if, based on the weight of available evidence, it is more-likely-than-not that some, or all, of the deferred tax asset will not be realized. As a result of the risks and uncertainties associated with future operating results, management believes it is more likely than not that the Company will not generate sufficient taxable income to recover the deferred tax operating asset and therefore has a full valuation allowance.